Talks surrounding ongoing macroeconomic headwinds in Nigeria have cast doubt on the country’s capacity to be competitive and fully realize the anticipated potential presented by the African Continental Free Trade Area (AfCFTA), which seeks to establish a single market among 54 African countries, with a combined GDP of $3.4 trillion. Nigeria’s business community welcomed the 2020 ratification of the African Continental Free Trade Area (AFCFTA) accord as a watershed moment, a chance to gain access to a 1.3 billion-person market and spur regional economic expansion. But only a few years later, the excitement surrounding this momentous decision has subsided somewhat, eclipsed by the nation’s deteriorating macroeconomic climate.
Over the past four years, Nigeria has been engulfed in a crippling economic catastrophe characterized by hyperinflation, skyrocketing interest rates, chronic foreign exchange shortages, and a persistent energy crisis. Businesses operating in the country are now much less competitive due to these interrelated issues, which has forced manufacturers to take drastic steps in order to survive. For some, survival was not an option. At least five multinational corporations have ceased operations in the past year, adding to the growing number of businesses pulling out of the Nigerian market as a result of unsustainable economic conditions.
Multiple multinational corporations are exit the country.
Particularly, the struggle is intense for exporters, who are seen as the cornerstone of the proposed trade integration of the AfCFTA. Access to essential raw materials has been severely hampered, operating expenses have increased, and pricing Volatility has skyrocketed due to the foreign exchange crisis, which has been made worse by uneven monetary policies. At a recent meeting in Lagos, stakeholders emphasized that delays, higher expenses, and restricted connectivity with other African markets are all caused by Infrastructure deficiencies, especially in the road, rail, and port networks. Nigerian products are less competitive than those from other African nations due to high energy prices and antiquated production methods.
Perhaps the departure of multinational corporations, which are typically used as indicators of economic health, is arguably the most concerning indication of Nigeria’s lack of readiness. Multinational corporations have been exiting the nation in large numbers during the past years. During this period, at least five global corporations have ceased operations. Their departure highlights the harsh limitations that companies encounter, providing a sobering overview of Nigeria’s capacity to draw in and hold on to Investment within the framework of the AfCFTA. These difficulties are exacerbated by the lack of timely and intentional rewards.
Exporters have cited issues with trade facilitation.
Also, exporters cite the absence of government initiatives to support their operations, such as Tax exemptions, subsidies, or easier access to funding. Regulatory roadblocks, such as an overwhelming amount of paperwork and delays in trade facilitation, add insult to injury. Due to this, businesses that ought to be taking advantage of the potential benefits presented by the AfCFTA are instead hindered by inefficiency. Exporters also cited issues with trade facilitation, the high cost of Logistics between Nigeria and other state parties, and technical trade barriers like weight, size, packaging, ingredients, required labeling, shelf-life conditions, testing, and certification procedures as additional barriers.
Stakeholders and experts including the Calabar Chamber of Commerce and the Manufacturers Association of Nigeria, emphasized the significance of reforms. Among the recommendations mentioned are investments in industry, innovation, and human capital; streamlining border procedures; lowering corruption; and forming public-private partnerships to enhance infrastructure. Aligning federal and state efforts is also vital to implement AfCFTA effectively. While the Nigerian government has expressed commitment to leveraging AfCFTA, there has been criticism that its preparations have been insufficient.
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Nonetheless, the government remains quite confident in its plans to maximize the potential of the AfCFTA, with initiatives like the Lekki Free Trade Zone—a 30-square-kilometer area designed to increase trade and commerce, on ground. In the big picture, AfCFTA represents a promise for Nigeria—a chance to redefine its role in Africa’s economic integration. The fate of Nigerian exporters, many of whom are still burdened by existing constraints, could very well determine which direction the country takes.